Catastrophe bond issuance climbed to $17.6 billion in the first half of 2026, representing the strongest half-year result on record, Swiss Re reported in its ILS Market Insights report.
The insurance-linked securities (ILS) market entered 2026 with notable momentum, sustained by investor appetite and a steady stream of sponsors both new to and returning to the market seeking protection. That movement persisted even as risk spreads compressed to levels not seen since before Hurricane Ian.
Swiss Re's analysis highlights that all-in yields for catastrophe bonds remained attractive when set against expected losses and returns available from conventional fixed-income instruments. The report linked the narrowing of spreads to continued robust investor demand and a generally well-capitalized market, while higher money-market rates helped underpin all-in yields.
The catastrophe bond market also benefited from a relatively tranquil catastrophe environment in the first half of 2026. Insured natural catastrophe losses were expected to come in below recent historical averages for the period, and Swiss Re noted that no single event caused meaningful disruption to market functioning.
Market capacity expanded over the first half of the year. Total outstanding notional rose from $59.8 billion at the end of 2025 to $64.8 billion on June 30, 2026. Swiss Re reported this represents a compound annual growth rate of 15.48% since 2021.
New entrants continued to appear. Twelve new sponsors accessed the catastrophe bond market for coverage in the first half of 2026, a cohort that included two ILS funds and two sovereign governments. Insurers also tapped catastrophe bonds to supplement traditional reinsurance programs and to gain additional capacity.
Issuance trends around renewal season were evident. Higher issuance activity in May of both this year and the previous year illustrated the market's growing reliance on catastrophe bonds for June 1 renewals, particularly when sponsors perceived favorable market conditions during the quarter.
Overall, Swiss Re's findings point to a market characterized by strong demand, rising use by a broader set of sponsors, and balance-sheet support from elevated short-term rates. The first half of 2026 thus set a new record for catastrophe bond issuance while leaving the market positioned with greater outstanding capacity.
Key points
- Record half-year catastrophe bond issuance of $17.6 billion in H1 2026, driven by investor demand and sponsor activity - sectors impacted: insurance, reinsurance, ILS funds.
- Total outstanding notional increased to $64.8 billion on June 30, 2026, up from $59.8 billion at end-2025, representing a 15.48% CAGR since 2021 - sectors impacted: capital markets and insurance-linked securities.
- Twelve new sponsors entered the market in H1 2026, including two ILS funds and two sovereign governments; insurers continued to supplement reinsurance with catastrophe bonds.
Risks and uncertainties
- Narrowing risk spreads - continued compression could reduce the yield premium available to investors relative to expected losses and fixed-income returns, affecting investor appetite - sectors impacted: investors in ILS and fixed-income markets.
- Market reliance on catastrophe bonds for renewals - increased dependence around June 1 renewals suggests concentration of issuance timing that could create pressure if conditions shift - sectors impacted: insurers, reinsurers, ILS sponsors.
- Change in catastrophe loss experience - the market benefited from a relatively calm period and lower-than-average insured losses in H1 2026; a material uptick in losses could alter market functioning and pricing.